When it's time to renew your company's health insurance program, be prepared to take a serious financial hit. After several years of steady rates, health insurance premiums are expected to rise significantly this year.
Although hard data is not yet available, the anecdotal numbers are causing serious anxiety. John C. Erb, a principal in the Miami office of William M. Mercer Inc., a human resources consulting firm, has completed the 1998 health plan renewals for his larger clients and has seen a wide range of increases. "It's all over the lot. One client saw a total increase of about 3.5 percent, another had 12 percent, and one had 6 percent," he says.
What does this mean for smaller companies? "I think small businesses have benefited greatly over the last few years from the competition among health plans [that were] looking to garner a share of the small employer market," Erb says. "Also, we've seen a lot of states implement reform for small groups, making it easier to get insurance. I think all of that is going to come home to roost [in 1998], and small employers are going to see increases in health-care costs."
Though higher rates may be inevitable, there are steps you can take to reduce the size of the increase. Begin with a thorough assessment of your needs, says Richard Coorsh of the Health Insurance Association of America, whose members include accident and health insurance companies. Then research the market to determine what products are available and how well they might meet your needs. "There may be more cost-effective ways you can provide quality health care," Coorsh says. "You can structure plans to either have or not have particular types of benefits; you can adjust co-pays and deductibles [to control costs]. But what it boils down to is a lot of comparison shopping, because the options are out there."
Erb recommends using the services of a knowledgeable independent insurance agent who can help you separate the facts from the marketing hype. He points out that insurance used to be a fairly straightforward product, but it has become an extremely complex benefit. Decisions you may make based on premium costs could have a major impact on the personal lives of your employees.
Businesses have a wider variety of sources for insurance than ever before, and those will probably continue to grow. In addition to buying insurance directly from an insurance company, you may also obtain coverage through associations, purchasing alliances and, in some areas, even your bank. And while it may seem convenient to take care of your insurance needs at the same time you handle other financial matters, keep in mind that a bank or other financial service entity that offers insurance is operating not as an insurance carrier but as a broker for a selected group of plans.
"When a bank has cut a deal with health plans, you're only going to get those plans presented to you," Erb says. "So be wary of trading the ease of selecting a plan with what's best for you and your employees. Even though you'll want to consider what your bank is offering, you still need the help of an independent insurance agent."